The impending doom and gloom some experts suggest Canada’s red-hot housing market is headed for is in part related to a notion the number of prospective buyers looking to borrow small fortunes to buy a home is dwindling.
Not so. New analysis from BMO’s economics department suggests the Canadian home buying population is “growing strong” – or at least one of its most important components is: first-time buyers.
The age cohort between 30 to 34 is adding members at its fastest pace in about a quarter of a century, BMO says, while the broader 25-34 group is still growing at a bigger clip than levels seen last decade.
This spells support for the market, BMO says.
“These age groups, of course, are prime years for first-time buying, having kids and then looking for a better yard,” economist Robert Kavcic notes.
READ MORE: Are we in a housing bubble? Expert admits ‘we don’t know’
In the chart below, BMO shows that a slowdown (and then contraction) in the rate of growth among the 25-34 year-old cohort in the 1990s (which was north of two per cent then dropped sharply) corresponds with more sluggish housing market conditions, with price gains and volumes decelerating.
The market place then roared ahead in the 2000s as the number of first-time buyers increased.
- How caregiving impacts a generation of Canadians: ‘Unpaid work does not end’
- From 5K to a full marathon: The best way to train for a long run
- Some 2019 candidates ‘appeared willing’ to engage with foreign interference: Hogue inquiry
- Black youth face multiple barriers accessing mental health care, experts say
Other experts support Kavcic’s observation, and suggest stable growth among first-time buyers will prevent the kind of sharp correction housing market bears warn about.
“At this point in the housing cycle, there is a risk that Canadian housing prices in some market segments are due for a modest correction,” the Conference Board of Canada said last month.
“Nevertheless, we believe that continued population growth, additional employment gains and modest mortgage rate increases will limit potential price declines in 2014 and 2015.”
Looking ahead, BMO, which relies on Statscan for the data, says projections for growth among this all-important demographic stand to cool over the coming decade.
Below: the general rate of population growth over the last three decades (in blue), and the rate of growth of those age 25-34 (in red).
Comments